Global Economy - Printable Version

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Global Economy - Guest - 01-13-2009

<b>China’s Exports Fall by Most Since 1999 as Wen Pledges Stimulus</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Shipments dropped 2.8 percent, the official China Daily said today. That compares with a 21.7 percent gain a year earlier. <b>Exports grew 17.2 percent for all of 2008, the newspaper said, down from 25.7 percent in 2007</b>.

Waning export demand has led to protests by fired factory employees, <b>an exodus of 600,000 migrant workers from the manufacturing hub of Guangdong, and an estimated urban unemployment rate of more than 9 percent.</b> Premier Wen Jiabao pledged Jan. 11 to add to the nation’s 4 trillion yuan ($585 billion) stimulus package to create jobs and avoid social instability.

“There is little hope that exports will recover this year, as developed economies remain mired in recessions,” said Sun Mingchun, a Hong Kong-based economist at Nomura Holdings. “Textile, steel and electronic exports are the most badly hurt.”

Global Economy - Guest - 01-14-2009

<b>China’s Economy Overtook Germany’s in 2007, Data Show</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Jan. 14 (Bloomberg) -- China’s economy overtook Germany’s in 2007 to become the world’s third largest, according to revised figures released by the Chinese statistics bureau today.

Gross domestic product rose 13 percent, more than a previous estimate of 11.9 percent, to<b> 25.731 trillion yuan ($3.38 trillion), </b>the bureau said on its Web site today. <b>That topped Germany’s 2.424 trillion euros ($3.32 trillion), </b>based on Bloomberg calculations using average exchange rates for 2007.

The fastest-growing major economy has expanded an average 9.9 percent a year since leader Deng Xiaoping ditched hard-line Communist policies in favor of free-market reforms in 1978. The nation’s efforts to sustain growth by rolling out a 4 trillion yuan ($585 billion) stimulus package may help to limit the severity of a deepening global recession.

“<b>This number is just one more piece of evidence that China is one of the most important players on the global stage,” </b>said Huang Yiping, chief Asia economist at Citigroup Inc. in Hong Kong. “China’s importance goes beyond even the ranking as number three because it’s one of the only resilient economies in the world today.”

<b>The U.S. economy is the world’s biggest, followed by Japan. China overtook the U.K. in 2005. </b>

<b>“If China continues to grow at its average rate in the past 20 years and if the U.S. does the same, it will overtake the U.S. in 20 years,”</b> said Tim Condon, head of Asia research at ING Groep NV in Singapore. <b>“There’s no doubt that that will happen -- it’s just a matter of time.”</b>

Global Economy - Guest - 01-15-2009

<b>Foreign Direct Investment in China Falls 5.7 Percent</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Jan. 15 (Bloomberg) -- Foreign direct investment in China, the world’s fastest-growing major economy, fell 5.7 percent to $5.98 billion in December from a year earlier.

For 2008, investment rose 23.6 percent to a record $92.4 billion, commerce ministry spokesman Yao Jian said. Non- financial outbound investment jumped 63.6 percent to $40.7 billion, with mergers and acquisitions accounting for half of that.

The number of new companies set up by U.S. investors in China fell 32 percent in the first 11 months of last year, according to government data. For European investors, the decline was 23 percent.


The economy expanded 9 percent in the three months through September last year. The fourth-quarter figure, to be announced next week, may be <b>as low as 5.4 percent</b>, according to Royal Bank of Scotland Plc. Exports fell in December by the most in almost a decade<!--QuoteEnd--><!--QuoteEEnd-->

Global Economy - Naresh - 01-16-2009

<b>Depression ahead, prepare for stock rout : SocGen</b>

LONDON : <b>Societe Generale said on Thursday that the United States’ economy looks likely to enter a depression and China’s could implode.</b>

In a highly bearish note, veteran cross asset strategist Albert Edwards said investors should now cut equity exposure after a turn-of-the-year rally and prepare for a rout.

He predicted that the S&P 500 index of US stocks could be set for a fall of around 40 per cent from recent levels. Edwards also raised the danger of a global trade war with China.

“While economic data in developed economies increasingly reflects depression rather than a deep recession, the real surprise in 2009 may lie elsewhere,” Edwards wrote.

<b>“It is becoming clear that the Chinese economy is imploding and this raises the possibility of regime change. To prevent this, the authorities would likely devalue the yuan. A subsequent trade war could see a re-run of the Great Depression.”</b>

Edwards has long been one of the most bearish analysts in London, first with Dresdner Kleinwort and then with SocGen

Cheers <!--emo&:beer--><img src='style_emoticons/<#EMO_DIR#>/cheers.gif' border='0' style='vertical-align:middle' alt='cheers.gif' /><!--endemo-->

Global Economy - Guest - 01-16-2009

China will sink very fast, West is already forcing China to appreciate Yuan. But China can play some tricks, they may sell US Bond which may force US to sell its assets or WAR.

Global Economy - Guest - 01-16-2009

<b>Circuit City Hires Liquidators to Sell Merchandise </b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Jan. 16 (Bloomberg) -- Circuit City Stores Inc., the bankrupt consumer-electronics retailer, hired four liquidators to sell all the remaining merchandise in 567 stores before it goes out of business, the company said today. <!--QuoteEnd--><!--QuoteEEnd-->
This will hurt China very much.

Global Economy - Guest - 01-19-2009

<b>Forex tide turns outward in China</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Official foreign exchange reserves rose in the fourth quarter of 2008 by $40 billion to $1.95 trillion, "but once adjusted for valuation changes in the portfolio, total inflows may only have been $10 billion, which means, according to our model an 'unexplained' foreign exchange outflow in Q4 of $240 billion," says Standard Chartered economist Stephen Green.

"Even if the scale is not as large as the headline figure suggests, the trend is pretty clear: 'unexplained' money (which includes 'hot' money) is leaving China," he adds.

Any estimate on capital outflows must be treated with caution, reasons Royal Bank of Scotland economist Ben Simpfendorfer. Even so, he estimates that "a decline in foreign exchange reserves of 'up to' $300 billion cannot be entirely ruled out."


In any case, with about $2 trillion in reserve, he says, China "has a cushion that no country has ever had on the reserve front."

The trend could likely prompt China's central bank to target a stable yuan over the next six months in order to deter a further rise in capital outflows, says Simpfendorfer. "The experience of early December, when the yuan's weakness sparked a surge in US dollar demand, was a timely warning on the risks of permitting the currency to weaken."

US Companies are bringing home money. Bank of America is facing stiff resistance from China Government on Bank deal.

Global Economy - Guest - 01-19-2009

<b>Gulf Shares Fall on Concern That Earnings May Lag Expectations </b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Jan. 18 (Bloomberg) -- Gulf shares declined as forecasts Saudi Basic Industries Corp.’s profit will drop stoked concern corporate earnings in the region may be lower than expected.

Saudi Basic, the region’s biggest publicly traded company known as Sabic, declined for a fourth day. Savola Al Azizia United Co., Saudi Arabia’s largest food producer, closed at its lowest level in almost two months after posting its first loss in at least eight years. Qatar National Bank SAQ ended the day at the lowest level since October.

Saudi Arabia’s Tadawul index dropped 1.1 percent to 4,649.67, bringing the five-day slump to 10 percent. Qatar’s Doha Securities Market Index fell 3.9 percent. The Dubai Financial Market General Index lost 0.4 percent and the Abu Dhabi Securities Exchange General Index retreated 2.9 percent.

“The consensus on Sabic’s numbers is a possible indication of weaker-than-expected fourth-quarter earnings across the region, which is why the markets are under pressure,” said Mohammed Galal, head of foreign institutional sales at Al Futtaim HC Securities in Dubai. “The local sentiment is negative, there is a lack of foreign investment, oil prices are falling and the global markets are weak.”

Global Economy - Guest - 01-19-2009

<b>China GDP Growth May Cool to Slowest Pace in 7 Years</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->China’s era of hyper-growth is coming to a sudden, very disruptive end,” said Kevin Lai, an economist with the Daiwa Institute of Research in Hong Kong. “China’s imports are slumping dramatically and the rest of Asia relies on it very significantly.”

After vaulting past Germany to become the world’s third- biggest economy in 2007, <b>China may this year face its first drop in shipments since at least 1990.</b>

Besides the export slowdown, slumps in stocks and property are undermining consumer confidence and growth.

<b>Among the biggest losers from China’s waning demand are Taiwan, which shipped almost 36 percent of its exports to China in 2007; South Korea, which sent 25 percent; and Japan, which shipped 19 percent</b>, according to UBS AG.

<b>At home, as many as 4 million migrant workers lost their jobs last year as factories closed and that figure is likely to jump another 5 million in 2009, Credit Suisse AG estimates. </b><!--QuoteEnd--><!--QuoteEEnd-->
9 million adult unemployed, how China will use them?
With 2 trillion in pocket, War is not a bad idea.

Global Economy - Guest - 01-19-2009

<b>Ruble Drops to Pre-1998 Crisis Low on 6th Devaluation This Year</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Jan. 19 (Bloomberg) -- The ruble fell below the weakest level seen in the 1998 Russian crisis after the <b>central bank devalued for the sixth time in seven days to protect reserves. </b>

The currency slid to as little as 33.1080 per dollar today, the lowest since early 1998, before the government defaulted on $40 billion of debt. <b>The ruble has lost 7.3 percent since official trading resumed this year, extending the decline to 29 percent since August</b>.

Global Economy - Guest - 01-19-2009

<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>European Markets </b>

National benchmark indexes fell in all 18 western European markets. <b>Germany’s DAX dropped 0.7 percent, while the U.K.’s FTSE 100 slipped 0.7 percent. Spain’s IBEX 35 lost 1.1 percent, led by Banco Santander SA</b>.

<b>Spain had its AAA sovereign credit rating removed by Standard & Poor’s in the second downgrade of a euro-region government in five days</b>, as the country’s first recession in 15 years swelled the budget deficit. <b>Greece’s rating was cut one step to A- on Jan. 14</b>.

Dow Jones Industrial Average futures slid 1.1 percent, while Nasdaq-100 futures fell 0.4 percent today.

Global Economy - Guest - 01-20-2009

<b>China Faces Worst Unemployment in Decades as Slowdown Deepens </b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Jan. 20 (Bloomberg) -- China’s official urban unemployment rate jumped for the first time since 2003 and may climb to an almost 30-year high as exports slump and a slowdown deepens in the world’s third-biggest economy.

During the fourth quarter of last year, the number of <b>registered jobless in cities jumped 560,000 to 8.86 million</b>, the official said.

Premier Wen said yesterday that China was facing its most challenging year so far this century and the government needed to urgently reverse the economic slide.

30 -40 years back, China got involved in Vietnam and Korea, before that India.

Global Economy - Guest - 01-20-2009

<b>Pound Slumps to Record Versus Yen; Rogers Says U.K. ‘Finished’</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Jan. 20 (Bloomberg) -- The pound dropped to a record low versus the yen and the weakest level since 2002 against the dollar on concern the government will have to rescue more banks as the economy slips into its worst recession since World War II.

Jim Rogers, chairman of Singapore-based Rogers Holdings, said the<b> “U.K. is finished” and investors should sell the currency</b>. Commonwealth Bank of Australia said there was a <b>high risk of a cut to the country’s credit rating outlook and lowered its pound forecast.</b> Prime Minister Gordon Brown authorized a 100 billion pound ($142 billion) bailout for banks.

“I would urge you to sell any sterling you might have,” said Rogers. “It’s finished. I hate to say it, but I would not put any money in the U.K.” Rogers correctly predicted the start of the commodities rally in 1999.

<b>The pound slid to 127.44 yen, the weakest since at least 1971</b>, as of 2:23 p.m. in Tokyo from 130.71 yen yesterday in London, according to data compiled by Bloomberg. It declined 2 percent to $1.4133, the lowest since March 2002, and last traded at $1.4185. The currency slid 1.1 percent to 91.58 pence per euro.

India is now in high risk zone. I suspect Government is hiding or cooking books.
Yerterday market was up and today it was down, Short selling is still on and big manipulation by local groups. I don't think international funds are manipulating Indian Market for last 10 days.
I don't think Moron Singh is watching Finance Ministry.
Indian Currency at 49 raise ?????

Global Economy - Guest - 01-20-2009

I always wondered why Indian Rupee is holding steady. If Indians are experts in fudging, then the bubble would burst.

Global Economy - Guest - 01-20-2009

Middle of last year it was 1USD = RS 41 but for last 2 months it came up. Even after 2 rescue to Indian Nationalized Banks, interest rate cut, dole to public, strike in oil sector, International funds disappreared from market, no new investment. Indian goverment lacks actual mechanism to calculate unemployment figures.
Either lazy babus are too slow to read figures, what should have done last month they will do after 2 months or Government is cooking books at higher level because of coming General Election.
Don't forget India's largest trading partner is UK and second is US, both are in tank. UK pound slipped to 1Pound = $1.39, last year it was $2.02 Euro is now $1.29
Yuan was under priced for long time, for them it is now adjustment, but it is still under priced. Indian Rs is a different story.
Who knows when RBI refused to answer whether they allowed Amar Singh to transfer $1-5 million to Clinton funds after N-deal and after it was visible Democrats will take White House.

Global Economy - Guest - 01-21-2009
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>The policy of printing money, also known as "quantitative easing", is a dangerous one however – most recently it has led to hyperinflation in Zimbabwe, which earlier this month printed the world's first trillion dollar note, worth roughly £20 – and both Bank of England and Treasury officials are extremely cautious about the plan.

Shadow Chancellor George Osborne said it was "the last resort for governments that have run out of other options</b>".<!--QuoteEnd--><!--QuoteEEnd-->

Why France is sitting quiet?

Global Economy - Guest - 01-21-2009

Well, I was dying to hear from France . <!--emo&Big Grin--><img src='style_emoticons/<#EMO_DIR#>/biggrin.gif' border='0' style='vertical-align:middle' alt='biggrin.gif' /><!--endemo-->

<b>French Banks to Get EU10.5 Billion Aid, Scrap Executive Bonuses</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Jan. 21 (Bloomberg) -- French President Nicolas Sarkozy agreed to provide a further <b>10.5 billion euros ($13.6 billion) in aid to the country’s biggest lenders </b>in exchange for their top executives giving up their bonuses.

<b>“We ask banks that make a profit to finance the economy” and not reward shareholders,</b> Finance Minister Christine Lagarde told reporters after the bankers met Sarkozy and top officials in Paris. The state wants banks to use the extra funds to boost shareholder equity, she said. The more profitable banks may still pay a dividend, she said.

The new funds will be made available “shortly,” a statement said.

Separately, the French banking federation said that the banks “are playing the game” and maintain their goal of increased lending even as the economy deteriorates.

The European Union yesterday projected that the <b>French economy will contract 1.8 percent this year</b>, cutting its earlier forecast for no growth, a forecast Lagarde called “painful.” Officially, she still projects the economy will expand next year, though she said today she’s preparing new estimates.

If this is France policy, well we should expect recession to go much deeper.

Global Economy - Guest - 01-21-2009

<b>Singapore Economy May Shrink Record 5%, Adding to Pressure for Stimulus </b>

Global Economy - Guest - 01-21-2009

Gloomy news from Neemrana

Dated: January 18, 2009

Government spokesmen claim that, after dipping in 2008-09, the economy will accelerate again next year. But some of the world’s top economists opined at last week’s Neemrana seminar that the global economy might get worse rather than better in 2009, affecting India too.

Analysts thought initially that the global recession would end by mid-2009. After all, trillions of dollars were being pumped into economies through fiscal and monetary measures of unprecedented magnitude. This, analysts felt, would surely revive spending in flagging economies.

Alas, that’s not happened. Retail sales in the US were disastrous in November and December. One US economist at Neemrana opined that the big US economic stimulus had raised spending by $ 400 billion. But this was insufficient to fill a demand gap of $ 600 billion caused by the recession. This gap eroded sales, causing job cuts that will cut income and spending even further. Corporations don’t want to invest, and it will take time for government infrastructure investment to fill the gap in private investment.

To encourage spending, the US government sent out cheques worth $ 80 billion to consumers. But consumers spent only $ 12 billion of this, saving the rest. After years of overspending, consumers are chastened and recanting, so the stimulus is not working. President-elect Obama has promised a second stimulus of $ 300 billion. It’s unclear whether this will work any better than the Bush stimulus.

After initially sniggering at the US capitalist model, Europe finds itself in deep trouble too. Recessions create fiscal deficits, and stimulus packages even more so. But some European countries already have such high public debts that they bar the risk of defaulting on repayments as their economies sink, a fate once reserved for Third World countries. Iceland is the worst hit, but may be small enough to be rescued by the IMF. But the IMF lacks the resources to rescue all tottering East European countries.

The really bad news is that mainline Eurozone countries like Greece are now in danger of sovereign default. A sequential run on the credit default swaps of European governments seems to have begun. Market rates suggest a 10-15% chance of Greek default. Greece’s national debt is a high 90% of GDP, of which 20% has to be refinanced in a few months. It’s unclear how Greece can be rescued if it defaults.

If Greece goes under, Italy, a G-7 country, will be next in line—its public finances are almost as bad. Britain can devalue to survive a financial crisis, but this option is not available to troubled Eurozone members tied to the euro, including Ireland, Portugal and Spain. Ailing banks in Eastern Europe are mostly owned by West Europe, so a banking collapse in the former could lead to massive contagion in the latter.

Indeed, the very conceptual foundation of the Eurozone, as one where a common currency ensured credit to all on good terms, is now in doubt. Wages and pensions are way too high in some countries relative to others. The problem was masked in good times. Now that the tide is going out, it’s becoming clear who was swimming naked.

Another top economist said at Neemrana that three aspects of the global crisis had been underestimated. One was the vicious downward spiral where financial distress caused production distress, which caused yet more financial distress. Second, the vulnerability of banks had been grossly underestimated. Third, nobody anticipated the speed with which galloping commodity prices in the first half of 20008 would be followed by collapsing prices in the second half.

As a result, he said, the world faces a shock of unprecedented proportions. Growth in advanced economies will fall in 2009, for the first time since World War II. Asia may seem in better shape than other regions, but this is largely because of the lag in transmission of the crisis from the West. Soon, Asia will be hit badly too. And India will suffer along with the rest of Asia.

Another top global economist declared that the crisis was structural, reflecting a serious global misallocation of money in recent years, which had created many bubbles that had now burst. Pumping in more money could not resolve the problem, since it amounted to an attempt to reflate the old bubbles. Instead painful structural change was needed, he said, and this could take years.

The mood of these top global economists at Neemrana was far gloomier than I had expected. While hoping they are wrong, we must be prepared for their being right.

(Neemrana rules prohibit reporting on who said what. The names of Neemrana economist-participants are available in the NCAER website).

Global Economy - Guest - 01-21-2009

<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->If <b>Greece goes under, Italy, a G-7 country</b>, will be next in line—its public finances are almost as bad. Britain can devalue to survive a financial crisis, but this option is not available to troubled Eurozone members tied to the euro, including <b>Ireland, Portugal and Spain</b>. Ailing banks in Eastern Europe are mostly owned by West Europe, so a banking collapse in the former could lead to massive contagion in the latter.

Indeed, the very conceptual foundation of the Eurozone, as one where a common currency ensured credit to all on good terms, is now in doubt. Wages <b>and pensions are way too high in some countries relative to others</b>. The problem was masked in good times. Now that the tide is going out, it’s becoming clear who was swimming naked.<!--QuoteEnd--><!--QuoteEEnd-->

Now watch, Syria, Egypt and Algeria.